By Document Type

By Start & End Date

Stretching the 500: FIAT May Need to Add a Brand or Two

The 500 has been a bright spot for FIAT and in conjunction with consumer trends which will continue to drive sales of distinctive small cars, the Italian group is rightly looking to extend its portfolio of aspirational vehicles. However, it should seek to differentiate them from its mass-market vehicles and, being a number, it is difficult to envisage how FIAT can stretch the 500 sub-brand beyond the 500C, 500L and 500X derivatives. The addition of a brand is therefore advisable – maybe even two.

Sales of FIAT Group Automobiles (FGA, comprising the FIAT, Lancia and Alfa Romeo passenger car brands and FIAT Professional commercial vehicles), have fallen every year since 2007 in Italy and will inevitably record their fifth consecutive year of decline in 2012. In fact, FGA sales in Italy are expected to tumble at least 20% further in 2012 which would take them to half the level they were in 2007. However, the group’s sales have been climbing outside Italy since 2006 and, even in the face of stiff competition at home, FGA has maintained its domestic market share at around 30%.

FGA Sales in Italy and the Rest of the World, 2000-2011

Source: Euromonitor International from Company Annual Reports

These bright spots are largely as a result of the introduction of the Fiat 500 in 2007 and it is therefore little wonder that CEO Sergio Marchionne has plans to revitalise FIAT with the 500 at the heart of this initiative. Increased urbanisation, single-person households and higher female employment rates are among the trends that are supporting sales of small but distinctive cars such as the Citroen DS3 and Nissan Juke in mature markets such as the UK. Furthermore, rising incomes are even leading consumers to reach for premium products like the Mini range in maturing markets such as Brazil and the Czech Republic.

Venturing upmarket, or at least into more distinctive territory, therefore makes a lot of sense for FIAT’s future product plans but as a number, the 500 will surely only stretch so far as a sub-brand. A further brand (or at least a sub-brand like Citroen’s DS prefix for its upmarket range) would therefore be highly recommended to distinguish any aspirational vehicles from FIAT’s mass-market offerings and especially the low-cost cars at the other end of the spectrum, such as the Palio and Mille that are offered in Brazil.

FIAT Mille and 500C

The focus should be on distinctive small cars, leaving Lancia (and thus Chrysler too) to compete in the near-premium compact segment and above and Alfa Romeo as the group’s premium representative. This would then avoid adding to FGA’s brand management conundrum, especially following the alliance with Chrysler, with FIAT positioned like Skoda, Lancia occupying a similar place as Volkswagen and Alfa Romeo being the clear competitor to Audi and BMW, for example. Finally, the distinctive small car brand would be optimally placed to emulate the success of the Mini brand. Beyond that, however, there could even be scope to add a low-cost brand beneath FIAT, especially for emerging markets. VW plans a similar initiative from 2015 although the details have not yet been announced. In the case of FIAT, Autobianchi and Innocenti are two possible budget brand names that spring to mind.